Bitcoin: Is A Bloody Correction Coming After The Euphoria?

After flirting with the mythical peaks of 100,000 dollars, Bitcoin is slowly but surely coming back down, leaving a bitter taste for those who hoped for even more. Experts warn that the worst could happen for short-term traders, as the excitement would soon give way to a brutal correction. But what do the models say about this potential descent? And why could global liquidity be the nerve of this war?

The Challenges of Bitcoin in the Face of Global Liquidity

The Bitcoin news: analysts agree that the queen of cryptos does not evolve in a vacuum. Jamie Coutts, crypto strategist at Real Vision, states:

” Global liquidity is tightening, and Bitcoin is dancing on borrowed time. ”

His MSI model (Macro & Liquidity Dashboard) has been sounding the alarm since October, foreshadowing two to three complicated months for BTC.

Some alarming observations:

• The MSI turned red in mid-October, signaling a trend reversal;
• Liquidity-driven rallies have a limited duration, often followed by severe corrections;
• The recent strengthening of the US dollar could further worsen the situation.

In summary, if economic conditions do not ease, Bitcoin could experience mediocre returns and increased volatility, which is not good news for “buy the dip” enthusiasts.

The Price of BTC Suspended by the Strength of the Dollar

Another key piece in this equation: the US dollar. Since November 2022, the DXY index (Dollar Index) has reached its highest levels, challenging risk asset markets. Jamie Coutts hopes this rise is just a “false start,” as an excessively strong dollar would be a drag on Bitcoin.

The recent top in the $DXY at 108 looks like a false breakout above natural resistance. This is constructive for my base case that conditions should ease going into Q1 2025. However, if it retakes that pivot high then we would likely see a very sharp pullback across all assets.… pic.twitter.com/etwdVj8esM

— Jamie Coutts CMT (@Jamie1Coutts) December 5, 2024

However, if the DXY pivot remains intact, Coutts remains optimistic for the first quarter of 2025. Until then, caution is advised. As in 2022, euphoric rallies often mask a reality: they are based on fragile foundations and are sometimes too heavily financed by leverage.

For traders, a friendly tip: leave your emotions at the door. A recent study by Kraken on FOMO has proven that giving in to the fear of missing out costs a fortune to investors. Don’t play with fire.